Chekiang First fuels 35pc rise at Wing Hang

Wing Hang Bank yesterday delivered its first annual results since completing the takeover of Chekiang First Bank, reporting $80 million earnings derived from cost synergies of the deal.

Chairman and chief executive Patrick Fung Yuk-bun said he expected the same amount of contribution from the merger this year, describing the integration of the two lenders as 'seamless and on schedule'.

'Substantial revenue and cost synergies had been realised in 2004,' Mr Fung said. 'We are confident that the full integration benefit will be achieved by the end of 2005, which is earlier than planned.'

Overall, Hong Kong's sixth-largest lender posted 35.2 per cent net profit growth to $1.16 billion, its highest to date and beating a market consensus of $1.08 billion.

However, the $4.83 billion takeover, which doubled Wing Hang's assets overnight, was also responsible for a seven-percentage-point-jump in its cost-income ratio to 42.2 per cent. Operating expenses jumped 44 per cent to $1.02 billion.

Analysts say this year's performance will determine the real value of the deal. 'This will be a crucial year to see if the merger was worth what it cost. Mr Fung's goal to bring the cost-income ratio down to 38 per cent by next year is reasonable and the bank should be able to achieve that,' said BOC International executive director and head of research Anthony Lok.

The biggest beneficiary from the merger is the bank's lending business. Net interest income rose 13.7 per cent to $1.79 billion - a growth rate dwarfing those of Wing Hang's rivals - largely due to the addition of Chekiang First's loan portfolio.